Q. How will the merger impact the digital transformation of Time Warner?
A. The combination of Time Warner with America Online provides Time Warner
with an extensive Internet distribution infrastructure in a relatively
brief period of time and cost-effective manner. In addition, the
combination of Time Warner and America Online accelerates Time Warner's
Internet distribution plan by several years and provides significant cost
savings with greater distribution capabilities, opportunities for cross-
marketing products and potential to offer consumers new and innovative
products than would other potential avenues for exploiting the potential of
Q. What is the shared vision for AOL Time Warner?
A. The merger of America Online and Time Warner will create the world's first
fully integrated, Internet-powered, media and communications company. The
Internet is becoming a critical everyday experience in people's lives. AOL
Time Warner will be able to inform, entertain and connect consumers in
multiple ways over many hours a day using its one-of-a-kind set of brands--
in both networks and content.
Q. How will AOL Time Warner create value for its stockholders?
A. AOL Time Warner is expected to generate strong growth along several
metrics. For example, AOL Time Warner is expected to have a revenue base
of approximately $40 billion in 2001, its first full year of operations. In
addition, AOL Time Warner is expected to have EBITDA growth of 30%,
resulting in approximately $11 billion of EBITDA in the first year.
Although predictions in fast moving industries such as the ones in which
AOL Time Warner will operate are complicated, revenues are expected to grow
at a rate between 12% and 15%, the EBITDA growth rate is expected to be in
the zone of 25% after the first year and AOL Time Warner's free cash flow
is expected to grow at a rate of approximately 50%.
America Online and Time Warner will provide each other's missing pieces,
reducing business risk. America Online and Time Warner will act as
catalysts on each other's current businesses. For example, Time Warner
will provide America Online with broadband capability and branded content.
America Online will provide Time Warner with a leading Internet brand that
has scale that is based on an economically sound subscription and